As we can see in the inflation article, this is a generalized increase in the prices of goods and services during a given period of time. But there are several types of inflation.
Prices ensure that resources are allocated efficiently to achieve market equilibrium and, thus, resources can be allocated efficiently. However, the most common is that prices increase, causing what is known as inflation.
When talking about rising prices, certain terminology is usually used to describe the different forms of price increases. This increase can be of several types; Negative or positive, can include all prices or only some, can be galloping or moderate. Next, we will see the different ways of falling inflation.
- Deflation: It is a decrease in prices. The opposite of inflation.
- Deflation: Decline in the inflation rate, that is, prices go up but less than before.
- Reflation: Attempt to increase inflation in the face of deflationary pressures (of falling prices).
- Stagflation: Can occur in times of economic crisis and leads to increased inflation and unemployment while there is a stagnation of GDP.
- Underlying inflation: It is an indicator that shows the most accurate short-term price variability since it does not include energy prices (very unstable) or unprocessed food.
Types of inflation according to its magnitude
Inflation is also denominated in different ways according to the percentage of increase:
- Deflation: It is a decrease in prices. That is negative inflation.
- Moderate inflation: Slow rise in prices, prices remain stable, with increases that do not reach 10% per year.
- Inflation galopante: Inflation levels of two or three digits within a year, that is, a product can triple its price in just one year, causing a tremendous loss of purchasing power. They are usually caused by major economic changes in a country.
- Hyperinflation: They are price increases by more than 1000% per year. They cause serious economic crises since money does not end up practically worth anything and the price of goods and services is excessive. Sometimes it may happen that the value of money becomes less than the cost of the paper it is printed on.
The editor recommends reading: Causes of inflation